SAP + eBay = DOA (Unless It’s M&A)

In a previous piece on the announced SAP and eBay partnership for spot buy support (a pilot program that is expected to occur in Q3-Q4 this year before potentially becoming generally available), I talked about these two strange bedfellows collaborating. I hope they can make it work because it is an interesting demonstration of B2B eCommerce that crosses multiple marketplaces, but has some common rules administration across them (e.g., to limit displayed items and require approvals). This is something that I was complaining about 15 years ago with ghost cards where I was hoping that such rules administration could be maintained in one place, but enforced whether the transaction was either untethered with a physical card too and enforced during a punchout, a local catalog, or any place where the commerce happens.

The ability to securely pass user credentials and personalization parameters via open APIs across sites and networks is one of those holy grails that is likely a long way off. It was one of the key concepts of the Global Trading Web that Commerce One touted over a decade ago. Still, large ecosystem vendors can establish de facto standards, and having two of them working together might be able to move the needle. However, could an SAP and eBay combination work? And in what form?

The challenge here is that both vendors are actively pursuing their own ambitions for world domination (along with Amazon, Apple, Google, Microsoft, Alibaba, Salesforce, Workday, Oracle, etc.), and both have so many of the same issues to deal with:

building out and integrating their own individual marketplaces (er, I mean, “commerce networks”)

running app marketplaces and having those apps tie into the broader network

selling technology platforms to build on top of

having native applications themselves, bringing them to cloud and porting them to new technology stack, and rationalizing/harmonizing them

fostering developer communities

building out partner ecosystems

rationalizing acquisitions beyond the product rationalization

setting up innovation centers

battling Amazon

and so forth

OK, the Amazon example is more eBay-centric, but it’s only a matter of time. SAP partners with Amazon on AWS, but as HANA moves from the PaaS layer down into IaaS and vice versa for Amazon, this relationship will become strained – note the slew of new infrastructure partnerships that SAP recently announced.

Anyway, for these players individually, the “completeness of the vision” listed above can understandably cast doubts on either one’s ability to execute. Basically, that vision is to sell the tools, the markets, the services to get intermediated into the commerce. In essence, they want to build the virtual highways, the on ramps, the cars, the construction/manufacturing equipment, and the tool booths (as well as collect the tolls). They might not like this analogy though.

In fact, last week Joe Fox from Ariba said, “We are not going to build any marketplaces. We are facilitating access—with controls and filters—to all the public and third-party content from various markets.” Huh? Ariba touts the largest indirect-focused source-to-pay horizontal e-marketplace out there, and has acquired smaller marketplaces just as eBay has. The only difference is that eBay is being more honest and transparent about it by having a marketplaces business unit versus its applications business (eBay Enterprise) and infrastructure businesses (X.commerce and PayPal).

As I wrote hereafter last year’s Sapphire event, SAP can’t have it both ways, if it wants to be the on-ramp (cloud apps) and the network (and the PaaS to develop the apps and extend the network) that intermediates itself into the commerce for a percentage of the take (just like eBay and PayPal do). If Waldorf feels a bit unclean about such intermediation and would rather just sell the tools, then separate out (or even spin out) the SAP Business Network as the proving ground that assembles the SOA-based commerce components built by itself and partners/developers in the HANA PaaS. The core SAP applications (including acquired applications) can be “components” similar to apps in the app marketplace, but obviously have a much better QA/certification process. Certifying the ecosystem apps to bolt on to the core apps properly is a great little business in its own right if it’s made more transparent.

The funny thing is that eBay is actually much further down the road on tying together a disparate grab bag of technology components and e-commerce sites (and its X.commerce initiative is a very explicit strategy to do just that). In fact, if you look at eBay’s history of acquisitions, you can probably envision how the firm might want to assimilate these capabilities into a standard commerce platform and ecosystem. This is where eBay essentially wants to enable multiple interoperable marketplaces rather than just the super site with different skins that Amazon represents. Does this sound like 15 years ago and Commerce One going the route of the Global Trading Web to combat Ariba’s marketplace? Yep. And SAP likes this strategy too. Now, I know what you’re thinking… that didn’t work out well for Commerce One! But, there are dozens of reasons not to extrapolate that forward. Don’t fall victim to hindsight bias and outcome bias: good/bad decisions are different than good/bad outcomes.

Which brings us back to SAP and eBay. Here’s my conclusion. These mega firms can’t “Barney-partner” their way to success. They have to merge. Huh? German ERP vendor and a Bay area auction site? Seems weird, but obviously these firms have morphed. Think about it: SAP stinks at extending to SMB/SoHo/consumers/storefronts and is not strong in retail. It is strong in large enterprise, driven by buy-side. But, in an omni-channel world where B2B is getting consumerized, social, and mobile, it needs a better connection into the massive sell-side ecosystem that eBay represents. If SAP/Ariba wants to improve the merchant connectivity like we’ve been harping on (and using Amazon as the example), then eBay is an interesting partner indeed. If you do it right, you make Amazon appear like the closed ecosystem, and you offer highly componentized and inter-operable commerce services from an open ecosystem, including trade finance plug ins, analytic plug ins, intelligence services, professional services, etc. But this also means that you need to offer competing payment networks – not just PayPal or Discover.

Keep in mind that there is not just a simple ‘network-effect’ buy-side/sell-side synergy of smaller suppliers/merchants selling into large buyers, but also the inverse situation of supporting the omni-channel supply chain into the consumer. Here, neither eBay nor SAP (nor Oracle) is strong in multi-tier supply chain. However, if one of them acquired GT Nexus first and helped make a better connection from manufacturing into retail, that might help with codifying the processes and standards/APIs to connect everyone. Nothing like the supply chain to force process standardization and discipline!

I know the combination of SAP and eBay seems weird, but their market caps have moved nearly in lock-step with each other and it’d be interesting to see John Donaho serving in a role like Ray Lane did with Larry Ellison, except with Bill McDermott as the East Coast version of Larry (and middle ground between Silicon Valley and Waldorf). It also brings up some interesting and scary possibilities of advertising space now being opened up on the business application screens everywhere. Fifteen years ago, my former boss Bob Parker (now at IDC) pitched to me this idea of letting suppliers advertise to your eProcurement system – and I thought he was nuts. I had thought, “Great, now the Microsoft paper clip guy will be popping up trying to sell me stuff.”

Now there will be truly no place to hide. Hey, the infrastructure exists (e.g., think AdSense) and it’d be easy to do and suddenly SAP can start offering super laser-targeted ads to advertisers, right? Welcome to the networked economy.

Interesting article. The SAP and eBay partnership is interesting and could definitely lead to an interesting use case of multi-channel sell and buy-side distribution. As both companies continue to invest in mobile technology, I believe PayPal will be a very important player in how closely aligned these companies can potentially become. PayPal is fueling eBay’s mobile business while their offline retail mobile play is still a work in progress.

Your last point on supplier sponsored advertising is an area we have been exploring with great interest in our own platform. SMB suppliers are largely invisible in marketplace solutions and search engines for Fortune 1000 organizations. If a supplier has the opportunity to promote their products to a captive buying group in a marketplace setting and get measurable data against these campaigns, I could see 100s of suppliers signing up at attractive price points in an ‘AdWords’ model.

Nice to see SAP agreeing with our strategy, as a marketplace we have always seen both the ERP’s and Ordering systems like Ariba as complementary. We have had ecommerce sites connected to Ariba since about 2005, and these are a mix of our own SiteGenerator ecommerce sites and other ecommerce sites that we plug in with our connectors.

The big challenge for Ariba is that 99% of their supplies are catalogue not punchout and customers now want puchout/b2b ecommerce sites, which we can provide. This is the same for all the other players on the buy side of P2P and why we have always seen them as partners going forwards.

Ariba is a procurement tool and no CPOs would require their employees to get access to ebay kind of website which does up-selling & cross-selling. Would be interesting to see how this partnership unfolds.